Rural Institutions and Producer Organizations in Imperfect Markets: Experiences from Producer Marketing Groups in Semi-Arid Eastern Kenya

As part of the structural adjustment program of the 1980s and the 1990s, many sub-Saharan countries have liberalized their economies and developed poverty reduction strategies that are intended to open new market-led opportunities for economic growth. However, market liberalization – expected to facilitate the functioning and effectiveness of markets – have had mixed results (eg, Jayne and Jones 1997; Winter-Nelson and Temu 2002; Dorward and Kydd 2004; Fafchamps 2004). Moreover, successful implementation of structural adjustments for poverty reduction requires, among others, good infrastructure and diversified agriculture (Kydd and Dorward 2004; Dorward et al. 2004b; Dorward et al. 2005). Lack of such economic transformation after liberalization has been attributed to factors such as partial implementation of reforms and policy reversals (eg, Jayne et al. 2002; Kherallah et al. 2000; Jayne and Jones 1997) and lack of strong institutions that support market and private sector development (World Bank 2002a and 2003). In areas with limited market infrastructure, the argument for lack of economic transformation of agriculture towards more commercialized production is strongly embedded in the lack of incentives for private sector investment and the need for proper institutions to fill the vacuum left by the withdrawal of the state